RSI - Relative Strength Index - Technical Analysis Indicator For Forex

RSI (Relative Strength Index) is a technical analysis oscillator. There are many uses of RSI, including objective buy and sell signals and bullish and bearish divergences. The RSI, as its name indicates, measures the relative strength of price currently compared to the past: The general formula uses a 14-period input. As an oscillator, above 70 is considered overbought and below 30 is considered oversold.

Some traders use the RSI to buy and sell signals. Usually interpreted as a buy signal occurs when the RSI crosses back above 30 after spending time in the oversold zone. A signal is declared when the sale RSI moves below 70 again after a period of time in the overbought zone. The RSI, as well as buy and sell signals is represented visually on the link to the table of relative strength index.

Another popular use of the relative strength index of stocks, futures, or the merchants of modernity is bullish and bearish divergences. Sometimes when the price is rising, but the RSI is declining or not moving, this may indicate problems. This tendency towards divergence may suggest that a trader out of position.

In contrast, when the price is falling, but the RSI is failing to go lower, but stable or increasing, a bullish divergence has occurred. A trader could exit any short positions.

The RSI is a versatile tool, it can be used to:

* Generate buy and sell signals
* Show overbought and oversold conditions
* Confirm price movement
* Warn of potential price reversals through divergences

The chart below shows how the RSI can generate easy to follow buy and sell signals:

RSI Buy Signal

Buy when the RSI crosses above the oversold line (30).















RSI Sell Signal

Sell when the RSI crosses below the overbought line (70).